Why mobile reward apps increase customer loyalty

To define ‘loyalty’ some principles from Neuroscience can contribute to our understanding of how our brains respond to emotions, memories, social interactivity and rewards.

Academic Neuroscience research studied MRI brain scans taken for both ‘loyal’ customers and ‘less loyal’ customers, in relation to certain brands. Results showed that in the case of loyal customers the presence of a particular brand serves as a reward during choice tasks, but less loyal customers do not exhibit the same reward pathway. It also found that loyal customers had greater activation in the areas of their brains that are concerned with emotion and memory retrieval. This suggests that loyal customers develop an affective bond with a particular brand that serves as the primary motivation for repeat purchases.

To learn loyalty to a brand your brain must first make a decision of brand X over brand Y. This process relies on your brain to make predictions based upon an expected reward for that choice and then evaluate the results. To do this your brain is required to remember both positive and negative outcomes of previous brand choices in order to make more accurate predictions regarding the expected future reward outcome of choosing a brand.

Your brain processes these outcomes in milliseconds and ‘expected rewards’ might for example include a helpful salesperson, an unexpected bonus with your purchase, a sincere thank you, a smile on arrival, all may serve as a ‘reward’ to encourage future customer loyalty. In that sense, this is why people often refer to the little things that matter. Because often it’s the smallest things that are most emotionally personal to a customer and because it feels personal your brain is likely to include those ‘little things’ in its split-second evaluation process.

A reward is the positive value that your brain assigns to an object or behavior. Primary rewards include those that are necessary for your personal survival – things like food, reproduction, or primary gain (e.g. food) from active decision-making. Then there secondary rewards, like money, which derive their value from Primary rewards. Secondary rewards can be created experimentally by pairing a neutral stimulus with a known reward. This is why sometimes your brain reacts positively to a discount coupon from a specific (e.g. food, restaurant) brand and unambiguously to another.

Neuroscience also depicts a conflict in your brain between your desire for immediate gratification from a small reward versus delayed gratification from a greater reward. The limbic system in your brain supports a variety of functions including adrenaline flow, emotion, motivation, long-term memory, and your sense of smell - so it has a great deal to do with the formation of memories. This causes you to be temporarily inclined towards any immediate gratification. The reasoning cortex of your brain balances your desire for instant gratification and can overcome this inclination by reminders of a better-delayed reward. In essence, your brain reasons that if I delay taking this immediate gratification, then there may be a greater reward in the future.

With traditional loyalty programs, this conflict in your is diminished by creating a balance between the immediate gratification that can occur when points are themselves framed as mini-rewards with the delayed gratification of the sizeable reward that can only be had by a considerable accumulation of loyalty points. In short, adding the “earn” experience to the “burn” experience theoretically encourages the member ‘to have their cake and eat it’.

Where this falls apart for almost everyone in respect of your brain choosing between brand X and brand Y is that for almost all loyalty programs, the vast majority of people never reach sufficient value in the “earn” level and therefore your brain becomes negatively attuned to past outcomes associated with choosing a particular brand. If you are anything like me, in your wallet, purse, or office drawer you’ll probably have unused food retailer points, unclaimed airline ‘miles’, and partially-completed ‘buy 6 get one free’ loyalty stamp cards from coffee shops. To understand the subconscious conflict in your brain now ask yourself honestly, how do you feel about those ‘unused rewards’ compared with, for example, the retailer giving you an immediate discount at the moment of your purchase or the coffee shop giving you a free muffin with your coffee. Imagine if they did give you instant gratification, do you think your brain would be more positively inclined towards that brand in future?

Now let’s consider the impact that the apps on your smart phone have had in the context of your brain’s conflict between instant gratification and delayed reasoning. Smart phone apps are implicitly about instant gratification. Before you had a smart phone, you almost certainly used a landline to make phone calls, you probably logged onto a laptop computer to access your email, printed and viewed your holiday snaps from a photo album, and inserted a CD into a music player to listen to it. In just a few recent years various apps on your smart phone have replaced all those activities and in doing so, given you instant gratification. The same logic applies if perhaps you’ve ever received a paper ‘discount coupon’ booklet, cut one out, and stored it in your purse or wallet for future use. Whereas, if you’ve already downloaded a location-based reward app (which is effectively mobile-based coupons) you’ll know how you simply search for ‘rewards’ that appeal and achieve instant gratification often by simply showing your mobile phone to the person serving you to instantly redeem a reward.

So if you answered yes to the earlier question and also agree that your mobile apps have led to more instant gratification, then it won’t come as any surprise to you why mobile ‘reward-for-feedback’ apps are also more likely to increase your loyalty to a brand. Subconsciously your limbic system and the reasoning cortex in your brain combine to respond positively to any opportunity to give your favourite brands feedback about the ‘small things’ that they do that make your customer experience even better for the future.

The fact that they also give you instantly usable coupons increases your future loyalty too so it’s a win-win for everyone.